I have to admire the State Government – the boldness with which they are willing to have a property taxation debate and the vision of at least opening the door to a mature discussion about the prospect of a uranium led economic recovery for South Australia should be admired.  Both of these matters are critical at a time when manufacturing is in decline and we are crying out for bold leadership.

The conduct of the State Tax Review may appear to be exciting to some – particularly to those that may see a reduction in their land tax on an annual basis because the burden is going to be shared by a greater number of landholders – namely the mums and dads who own their homes.  Some would argue that we already have a broad based land tax called the Emergency Services Levy.  I am a subscriber to that theory and for all of those that have paid or paying their Emergency Services Levy at the moment, regardless of what the money is to be used for, I am certain that they are feeling that owning land in this State is like being an open purse for the State Government.  Property taxation has been for far too long the basis on which State Governments raise the money to pay for the much needed hospitals, police and teachers.  A very wise business person once said to me that the moment you are relying on more than 25% of your revenue from one particular source then you are vulnerable – sadly that is not the case when it comes to property taxation.  The hand of government just keeps reaching deeper into the pocket of land owners.  It’s simply not sustainable and not fair to those people any more.

What’s the alternative? We need to have a debate and discussion about the natural quid pro quo of increasing and/or broadening the GST and reducing inefficient property taxation.  It was promised over a decade ago and it is now time to deliver. The State Government’s Tax Review remains as a ‘brave’ discussion but quite frankly it is not brave enough. Again South Australia has the ability to lead this discussion and most importantly, lead the discussion and debate on how to ensure the most vulnerable in our society are protected from disadvantage when the GST does increase and/or broaden.  There is nothing new in what I am saying – in fact it is a very old tune that has been played over and over again by every economist that has ever written on the topic.  It seems the tune is the same but the volume of sound has diminished as political parties of all persuasions play ‘duck and cover’ on this very important issue of taxation, and in particular, property taxation review.

The interesting thing from my perspective with the State Government floating the idea of a broad-based land tax to replace stamp duty is the enormous amount of focus on the argument that those people who have recently bought property and paid their 5 odd percent for stamp duty do not want to pay it again via a land tax. Sure no one wants to pay twice the amount of tax but again the debate should not be on process issues (albeit very important ones to those who may have purchased land and paid stamp duty over the last several years). Furthermore the debate needs to transcend electoral cycles.  Some commentators have put it to me that real estate agents should be happy with such a removal in stamp duty as it means there would be more sales each year.  That would be a cynical short term view to take and thankfully not one that the leadership of REISA takes!

So in short what am I saying?  Yes it is brave to put State Taxation reform on the table. But to leave out of the debate and discussion a consumption based taxation regime (ie GST) albeit with ensuring those vulnerable in society need to be looked after in such a change, needs to be confronted head on.